It should be noted that the total distributions available to Stapled Securityholders is an aggregate of the distributions from EH-REIT and EH-BT, and is thus dependent on the financial performance of EH-REIT and EH-BT respectively, instead of the consolidated financial performance of EH-REIT and EH-BT.
DISTRIBUTION POLICY OF EH-REIT
EH-REIT's distribution policy is to distribute 100.0% of EH-REIT's Annual Distributable Income for the period from the Listing Date to the end of Projection Year 2020. Thereafter, EH-REIT will distribute at least 90.0% of its Annual Distributable Income for each financial year. The actual level of distribution will be determined at the REIT Manager's discretion.
The actual proportion of Annual Distributable Income distributed to Stapled Securityholders beyond the end of Projection Year 2020 may be greater than 90.0% to the extent that the REIT Manager believes it to be appropriate, having regard to EH-REIT's funding requirements, other capital management considerations and the overall stability of distributions.
For these purposes, and under the terms of the EH-REIT Trust Deed, the "Annual Distributable Income" for a financial year is the amount calculated by the REIT Manager (based on the audited financial statements of EH-REIT for that financial year) as representing the consolidated audited net profit after tax of EH-REIT (which includes the net profits of the SPVs held by EH-REIT for the Financial Year, to be pro-rated where applicable to the portion of EH-REIT's interest in the relevant SPV) for the financial year, as adjusted to eliminate the effects of Adjustments (as defined below). After eliminating the effects of these Adjustments, the Annual Distributable Income may be different from the net profit recorded for the relevant Financial Year.
"Adjustments" means adjustments which are charged or credited to the consolidated profit and loss account of EH-REIT, including the audited net profits of the SPVs held by the EH-REIT for the Financial Year to be pro-rated where applicable to the portion of the EH-REIT interest in the relevant SPV) for the relevant financial year or the relevant distribution period (as the case may be), including but not limited to (i) differences between cash and accounting gross revenue, (ii) unrealised income or loss, including property revaluation gains or losses, and provision or reversals of impairment provisions; (iii) deferred tax charges/credits; (iv) negative goodwill; (v) differences between cash and accounting finance and other costs; (vi) realised gains or losses, including gains or losses on the disposal of properties and disposal/settlement of financial instruments/assets/liabilities; (vii) the portion of the Management Fee, acquisition fee, divestment fee and development management fee that are paid or payable in the form of Stapled Securities; (viii) costs of any public or other offering of Stapled Securities or convertible instruments that are expensed but are funded by proceeds from the issuance of such Stapled Securities or convertible instruments; (ix) depreciation and amortisation in respect of the properties and their ancillary machines, equipment and other fixed assets; (x) adjustment for amortisation of rental incentives; (xi) other non-cash or timing differences related to income or expenses; (xii) differences between the audited and unaudited financial statements for the previous Financial Year; (xiii) other charges or credits (in each case from (i) to (xiii) as deemed appropriate by the REIT Manager); and (xiv) any other such adjustments as deemed appropriate by the REIT Manager.
The REIT Manager will also have the discretion to distribute any additional amounts (including capital). In determining whether to distribute additional amounts (including capital), the REIT Manager will consider a range of factors including but not limited to EH-REIT's funding requirements, its financial position, its growth strategy, compliance with relevant laws, regulations and covenants, other capital management considerations, the overall suitability of distributions and prevailing industry practice.